RRIF: How Your RRSP Becomes Retirement Income
A Registered Retirement Income Fund (RRIF) is the account an RRSP converts into for the drawdown phase. The investments keep growing tax-deferred, but from the year after it is opened you must withdraw at least a government-set minimum each year, and every dollar withdrawn is taxed as ordinary income.
The conversion deadline is fixed: by 31 December of the year you turn 71 an RRSP must be converted to a RRIF, used to buy an annuity, or cashed out — and cashing out means the whole balance lands in one tax year. Most Canadians convert to a RRIF because it keeps the money invested, keeps the tax deferral, and lets them choose the withdrawal timing above the minimum. You can convert earlier than 71 if you want the pension income credit from 65.
The minimum withdrawal is a percentage of the RRIF value on 1 January, rising with age: about 5.28% at 71, 5.82% at 75, 6.82% at 80, 8.51% at 85, 11.92% at 90 and 20% from 95 onward. No tax is withheld on the minimum, but anything above it is subject to withholding of 10%, 20% or 30% by band (Quebec differs), which is a prepayment against the tax owed on your return, not the final bill.
A useful lever: the minimum can be calculated on a younger spouse's age instead of your own, which lowers the mandatory withdrawal and keeps more of the balance sheltered. From age 65, RRIF income also qualifies for pension income splitting — up to half can be reported by a lower-income spouse — and for the federal pension income tax credit on the first $2,000.
RRIF withdrawals are income for Old Age Security purposes, so large forced withdrawals can push you over the OAS recovery-tax threshold and claw back part of the benefit. Retirees with big RRSPs often draw down more than the minimum in the low-income years between retirement and 71, precisely to shrink the balance before the mandatory percentages bite.
You cannot contribute to a RRIF, but you can hold the same investments an RRSP holds and you can have more than one. On death, a RRIF can roll tax-free to a spouse or a financially dependent child or grandchild; otherwise the full remaining value is taxed on the final return. Naming a successor annuitant or beneficiary directly on the account keeps it out of probate.
Richify projects your RRIF balance year by year at the mandatory minimum and at your chosen withdrawal, alongside CPP and OAS, so you can see the tax bill and the clawback risk before 71 arrives rather than after.
